INVERTED SPREAD

A situation in which a short-term instrument generates a higher rate than a long-term instrument. To compute, subtract the longer term by the shorter term. As a result, the shorter term instrument is yielding a higher return rate than the longer one. The inversion can be caused by the overall supply and demand for some instruments or economic fluctuations. This is different from a normal market where a long-term instrument should yield higher returns to compensate for time.